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The jack-o-lanterns are still on the stoop, but already we're seeing prices
for holiday ornaments slashed in half at J.C. Penney and pricey toys at
Wal-Mart marked down to $10 a pop. Home Depot skipped Halloween altogether,
piling up Christmas trees by early October.

Retailers always engage in some Christmas calculus to get you to loosen your
wallet during the holiday season, but this year it feels a little more
desperate. Stores are starting their promotions earlier in the hopes of
luring in customers quickly to spend money  before they're tapped out or the
markdowns get any steeper. Black Friday, the Friday after Thanksgiving, is
the traditional kick-off of the holiday shopping frenzy, and it will still
be the biggest sales generator of the season. But don't sweat it if you
can't shop that day. "We will start to get Black Friday level deals every
week," says Brad Olson, owner of GottaDeal.com, an online bargain site.

One reason for the earlier discounts: a shorter window to shop. Black Friday
falls on November 28th this year, the latest date possible. That means five
fewer shopping days (and one less weekend) between Thanksgiving and
Christmas than last year. "Stores are trying to grab their share of
consumers earlier because they don't think there will be that much to go
around," says Stacy Janiak, vice chairman and U.S. retail leader at
Deloitte LLP. "If they can get people to shop now it will be better than
waiting."

For many retailers, holiday sales account for as much as 40% of their annual
revenue and up to 80% of their profits  hence the name Black Friday or the
day when stores traditionally go from being "in the red" to "in the
black." That's an overstatement, but with holiday forecasts predicting flat
to 1% sales growth  according to Bain & Co and Archstone Consulting
respectively  retailers are anticipating one of the toughest holiday
shopping periods in decades. Consumers cut back spending in the July to September quarter by the
largest amount in 28 years as they grappled with a tanking economy,
tightening credit and looming lay-offs. "It's going to take excruciating
deals to get people into the stores this year," says Olson. "Stores need to
walk the line between big deals and still making money."

The key for retailers will be managing inventory smartly. The economy has
been braking for months, so many stores have already adjusted inventories
accordingly. "Don't forget, this slowdown started hitting a lot of retailers
back in December of last year," says Darrell Rigby, head of Bain & Company's
global retail sales practice. "It might be challenging, but it's not
completely surprising." Still, no one predicted a Wall Street implosion
right before Santa Claus' arrival.

So far, Sears, which has been struggling, is leading the promotional pack,
announcing 450 door busters, or specially priced items, from 5 a.m . to 11
a.m. on Black Friday. Shoppers will find deep discounts in electronics, like
a Sony Blu-ray Disc player for $179.99, down from $300, and a 46-in. Sharp
LCD HDTV for $899.99, reduced from $1,400. Although Wal-Mart already marked
down 10 toys to $10, from butterfly-winged Barbie Mariposa to Fur Real
Newborn Animals, its full Black Friday prices won't be announced until
November 24.

The pre-Thanksgiving maneuvering is getting interesting. To counter
Wal-Mart, the much smaller KB Toys slashed prices to $10 or less on more
than 200 items. Best Buy is staging an essay contest: applicants vie to
describe how important a family ritual Black Friday shopping is. The 25
winners get a $1,000 gift card, a limo ride and early admittance at 4:30
a.m. to the Black Friday deals. The electronics dealer will provide hot
chocolate and outside movie screens showing holiday films to tired
customers who wait in overnight lines. And in a drastic move to steal
market share from competitors, Kohl's is rolling out 46 new stores just as
the holiday shopping season ramps up.

One difference this year is that online retailers are getting in on the
Black Friday action. Most stores will let shoppers get Black Friday deals
online instead of fighting the crowds. Amazon.com, which is, of course,
storeless, is sending out promotions in mid-November. In previous years it
didn't do anything special for the big day, says Vincent of BlackFriday.info.

Retailers could well be fighting over less. Almost 60% of consumers expect
to reduce their spending this Christmas according to Deloitte's annual
holiday survey, with 11% reporting that they're still paying off holiday
debt from last year. Shoppers indicated they would purchase a lot fewer gifts this year  21.5 presents on average compared with 23.1 last year. Almost seven in 10 said they intend to change their shopping behavior because of the
economy; 81% say they plan to buy more sale items. "Over the last few
holiday seasons consumers would buy for themselves too as they shopped, but
there will be a pullback on this," says Janiak from Deloitte. The good news:
those who received a federal government stimulus check over the summer said
that, on average, 20% of that money remains unspent, meaning it's available
for holiday shopping.

While analysts say there is no must-have item this Christmas season, they
expect discount chains like Wal-Mart to lead the pack. "This is the kind of
economy that Sam Walton built Wal-Mart to serve," says Rigby of Bain.
Consumer electronics could be a bright spot especially since prices for
items such as plasma screen TVs and GPS navigation systems have declined
dramatically. And with consumers indicating they're planning on staying home
more often-eating in or taking "staycations" instead of vacations  a brand
new TV or DVD player might be a good way to indulge while still saving
money.

One thing will not change, even with an economic slowdown: people will
continue to buy gifts. What's undecided is how many and how much. Says
Martin, "You have to do a lot to take away Christmas from the American
consumer."